top of page

The Trend is Your Friend: A Fresh Take on an Old Adage

The popular Wall Street saying, "the trend is your friend," often leads investors astray, especially at the turn of market cycles. While riding the bull market may seem profitable, the challenge arises at the cycle's peak—a turning point that's notoriously difficult to predict. Many investors, emotionally invested at the bull market’s zenith, fail to recognize the warning signs, holding on as the trend reverses and incurring substantial losses. At WBI, our Trend Switch methodology is tailored for those with low to moderate tolerance for losses, emphasizing capital preservation and demonstrating effectiveness across more than 30 years of fluctuating market cycles.


Beyond Momentum


Not all trend-following strategies are created equal. Traditional momentum-based strategies, which have been around for over a century, often fall short during volatile market conditions that lead to rapid price reversions, resulting in significant losses. Our approach at WBI transcends traditional methods by integrating advanced quantitative mathematics and artificial intelligence. Our technology assesses evolving risks and return potentials using more than a dozen trend models, combining indicators of economic growth, corporate fundamentals, and monetary policy with a refined analysis of momentum quality. This enhances the accuracy of each signal, facilitating our ability to capture positive trends while attempting to exit positions swiftly before negative reversals to protect capital.

Bar Chart
Market and Economic Factors Considered in the Trend Switch Model Source: WBI 2024

Introducing the Multi-Asset Trend Switch SMAs


Our revolutionary Multi-Asset Trend Switch SMAs epitomize our investment philosophy. These strategies balance equity and bond models with the goal of mitigating risk and enhancing returns through various market conditions. Capital is allocated to equities when our Equity Model (EM) signals 'risk on,' and shifted to bonds, as per our Bond Model (BM), when it signals 'risk off.' The BM fine-tunes allocations based on credit quality—from treasury to high-yield bonds—and duration, optimizing asset positioning across market cycles. This strategy minimizes periods of being uninvested, thus avoiding missed opportunities for returns.


A Critique of Passive Buy-and-Hold


We challenge the conventional passive buy-and-hold strategy for its exposure to significant losses during bear markets. This traditional method often forces investors to sell at market lows to preserve capital and delays reinvestment, causing them to miss out on early recovery opportunities and buy in when the market is overvalued. At WBI, we prioritize capital preservation as the cornerstone of successful investing, understanding that achieving consistent growth through both bullish and bearish cycles is key to long-term success.

Chart
Reducing Large Losses Can Unleash Compounding Source: Bloomberg, 2024. Indices are unmanaged and may not be invested in directly. Past performance is not indicative of future results.

WBI’s Proactive Investment Process


In response to the inherent limitations of passive strategies, WBI has developed a proactive investment process driven by sophisticated, math-based software that eliminates emotional bias. This allows for timely adjustments between full investment and conservative cash or bond holdings as dictated by market conditions. Our proprietary system continuously manages risk, aiming to minimize losses and capitalize on gains as market trends peak and turn.

Cover
Click Below to Download the Pitch Deck

Trend-Switch-1000-Pitch-Deck-03-31-2024
.pdf
Download PDF • 209KB

Invitation to Invest with Confidence


In light of ongoing structural economic challenges, now is an opportune time to explore WBI’s Trend Switch Portfolios, enhanced with sophisticated quantitative strategies to improve performance. If you are seeking an investment manager with a distinctive and effective approach for navigating through various market conditions, we invite you to learn more about how our Trend Switch strategies can help you achieve your investment goals.






Disclosure


Past performance does not guarantee future results. This is not an offer to buy or sell any security. No security or strategy, including those referred to directly or indirectly, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. You should not assume that any discussion or information provided here serves as a substitute for personalized investment advice from WBI or any other investment professional. If you have questions regarding the applicability of specific issues discussed to your individual situation, please consult with WBI or your chosen professional advisor. This information is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. Additional information about WBI’s advisory operations, services, conflicts of interest and fees are in the Form ADV, which is available upon request or on the SEC's website at www.adviserinfo.sec.gov. WBI is a registered investment adviser. Registration of an Investment Adviser does not imply any level of skill or training.


The Morningstar RatingTM for funds, or “star rating”, is calculated for separate accounts with at least a three-year history. It is calculated based on a Morningstar Risk- Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics.


Market conditions may call for the strategy to remain in any of the possible exposure allocations for an extended period of time. At times, market conditions and the particular Portfolio Strategy, may call for an allocation of 100% to cash or cash equivalents. If the portfolio strategy invests all or a substantial portion of its assets in cash or cash equivalents for extended periods of time, including when it is investing for temporary defensive purposes, it could reduce the strategy’s potential return as the limited returns of cash or cash equivalents may lag other investment instruments in a strong market.


There are risks associated with AI portfolio management tools. AI can be affected by data quality, algorithm design, model assumptions, or external factors such as market volatility, regulatory changes, or human intervention. The models and techniques used in developing and designing the algorithms used in the Trend Switch investment strategies are based on the information and data provided by third parties as well as on assumptions, assessments, and estimates, all of which are subject to error.


Other strategies may have different results

393 views

Comentarios


Unless otherwise indicated all performance is sourced from Bloomberg.

Disclosure

The views presented are those of the authors and webinar or podcast hosts/participants, and should not be construed as investment advice. The authors, podcast participants, webinar hosts, or clients of WBI Investments, LLC (WBI) may own stock discussed in these insights. WBl is an investment adviser in New Jersey. WBl is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. WBl only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of WBI's current written disclosure brochure filed with the SEC which discusses among other things, WBI's business practices, services and fees, is available through the SEC's website at: www.adviserinfo.sec.gov. This site contains links to third-party websites. WBl does not endorse, approve, certify, or control these websites and does not assume responsibility for the accuracy, completeness, or timeliness of the information located there. Your access to and use of such websites is governed by the terms of use and privacy policies of those sites, and shall be at your own risk. WBI disclaims responsibility for the privacy policies and customer information practices of third-party internet websites.

bottom of page